Garuda Presents a Formal Debt Rescheduling Request

Garuda Indonesia have presented a formal scheduling proposal to JP Morgan and other creditors in an effort to address its massive debt incurred in the purchase of six Airbus A330-300 aircraft between 1988-1992.

Bisnis Indonesia reports that Garuda's debt imbroglio dates from the purchase the six Airbus A300-300 between 1988-1992 with a unit cost of US$214 million and a total tally of US$1.2 billion. Using the 2003 price for the subject aircraft of US$140 million reports the newspaper, the natural conclusion suggests a mark up of US$74 million per airplane resulting in a projected total loss of US$444 million to the Government.

Data provided by the Ministry for State-Owned Enterprises to Commission XI of the House of Representatives (DPR) indicate that Garuda's debt as of June 30, 2007, stands at US$737.38 million.

In addition, these are syndicated loans owed to Bank Mandiri of Rp. 60 billion (approximately US$6.5 million) and a loan from Bank Negara Indonesia of Rp. 130 billion (approximately US$14.1 million) – both in payment suspension until at least December 2007.

The Secretary of the Ministry for State-Owned Enterprises (BUMN), Muhammad Said Didu, confirmed to Bisnis Indonesia that Garuda must begin selling non-productive assets in order to assist current restructuring steps. "We (BUMN) will purchase Garuda's headquarters which will now move to Cengkareng," explained Didu.

He went on to confirm that the Government remains steadfast in its intention to sell Garuda to a well-heeled strategic partner who can add value to the airline's operations.

Garuda has currently budgeted US$1.6 million to rent two Boeing 737-800NG to help meet growing demand. Those funds have been allocated from a recent US$52.5 emergency cash bailout provided by the Government. The two new aircraft are expected to enter service during the third and fourth quarters of 2007.

Garuda is targeting to carry 2.53 million passengers in 2007, an increase of around 15% from the number carried in 2006.